Lead Time
The total time between placing a purchase order and having that inventory ready to sell.
In practice
It includes production time, any factory queue before that production even starts, and transit time to the destination warehouse - and it's the single biggest input into calculating a safe reorder point, since a longer lead time demands a larger safety buffer.
A supplier quotes a 45-day lead time: 30 days to manufacture the order plus 15 days of ocean freight to the buyer's warehouse.
Why it matters
Underestimating lead time is one of the most common causes of stockouts, since a business that reorders based on an optimistic assumption runs out before new stock actually arrives.
Worth knowing
- Includes production time, any factory queue, and transit time, beyond the shipping portion alone.
- Should be tracked per supplier and reviewed periodically, since it can drift over time.
- Longer lead times require a larger safety stock buffer against demand spikes or delays.
Related terms
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